Wed | Sep 20, 2017

Mark Wignall | Scary times when the bank calls

Published:Thursday | February 23, 2017 | 2:00 AM

Following the financial sector meltdown of the mid-1990s, the formation of FINSAC and the creation of institutions run by foreigners to sell off the assets of those affected, on about five occasions I sat with groups of debtors and listened to their horror stories.

Up front, to the public, it was simply about bad debt. To Omar Davies, the finance minister during those troubling times, it was, strangely, about poor management, as he told me in an interview held with him in early 2006.

The reality was the stories behind the story. Men and women who once ran their companies with confidence, honour and profitability, and had sizeable staff complements, saw it all snatched away from them as their lives became broken and twisted versions of what they were before.

Men were driven to alcoholism and some who were once proudly virile found a new friend walking tall beside them. Erectile dysfunction. Some partners walked away and many marriages and families were shattered.

One man told me about his wife. She was seated at poolside with a bottle of whisky on the table and a smile of resignation on her face. He approached her carefully as their lives spun out of control. She was never a drinker, but she was putting the bottle to her lips and guzzling it down.

They had received the news that day that their last possession, their swanky house in the hills, had not just been put up for sale, but was already sold. Then he saw her hands on his licensed firearm. In the next-second, she brought the gun up to her head, and, in what had to be the most sickening bang in his life, his wife was dead.

 

SAD ERA

 

Hopefully, when the FINSAC report is finally delivered, much more light will be shed on this sad era of our lives.

Having spoken to a few persons over the last six weeks, it seems that Finsac-type lending and operation still exists in some of our commercial institutions. In one case that I know of, a man named Stan (not his real name) borrowed the equivalent of US$600,000 to retool his business.

As collateral he put up his house, a pricey unit in a prime real estate area in uptown St Andrew. The agreed-on valuation was US$2.3 million. Five years later, he admits to me, the loan went sour and after much shuffling, it dawned on him that he would be losing his house.

Based on the initial interest and the monthly payments, he had repaid $500,000, but could not repay the balance piled up by interest. "I admit it was my fault. The bank had every right to sell. The way I figured it, the bank could easily get $2 million for the house. My loan would be cleared with them and I would end up with some cash."

What happened instead was that the house was sold not by public auction, but by private treaty, and it was sold for $400,000. "I happen to know that the man to whom it was sold was a well-known client of the bank and a man of means.

 

OUTSTANDING AMOUNT

 

"Now, not only has the bank taken away and sold my home for significantly less than it could have fetched, it did it when my own realtor had intervened and had told the bank of a buyer who would have paid significantly more and would have satisfied all parties."

"So where do you go from here, now?" I asked him.

He smiled ruefully. "The bank has taken out suit against me to recover what it classifies as outstanding amounts and is attempting to force the sale of another property I own," said the 65-year-old businessman.

"Mr Wignall, this is almost like a return of Finsac-style banking. Had the bank taken cues from my realtor, the conditions under the loan gone bad would have been met, the bank would have recovered its full amount, and I would have ended up with a little cash. But no, now it wants to finish me off."

I cannot assist this man, but I can hope that the FINSAC report, when it comes, will serve as a guide to stave off any predatory loan practices still lingering in the banking sector.

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